Dip in fuel prices, MCO may see petrol stations close, says group

Many petrol stations are struggling to stay afloat due to the drop in fuel prices and the lack of traffic as people remain indoors during the movement control order.

PETALING JAYA: The country’s main association for petrol dealers says it fears the bulk of some 3,800 stations nationwide will have to suspend operations due to financial issues related to the “double whammy” of consecutive drops in fuel prices and the loss of traffic due to the government’s movement control order (MCO).

Petrol Dealers Association Malaysia president Khairul Annuar Abdul Aziz told FMT the sale of fuel products is down by 70%.

On average, he said, a station needs a working capital of RM150,000 to RM200,00 a month to buy fuel.

Operating costs, including utilities and staff wages, are around RM30,000 to RM70,000 depending on the size of the station.

“Usually, the money for this comes from the margins from selling fuel. But this month, there have been no margins as fuel prices have dropped for three consecutive weeks.”

He said these drops cost petrol stations an average of RM40,000 each as the price at which they buy petrol is higher than the selling price the following week.

Because of the MCO and the resulting drop in sales, he said, much of the stock which was purchased at RM1.82 per litre is now being sold at RM1.44.

“That is a loss of 38 sen per litre, which means we are effectively subsidising consumers 38 sen a litre.”

With no margins and operating costs to pay, Khairul said many petrol station owners might have to close temporarily as they do not have sufficient reserves.

“For many stations, if they keep on running, it will be worse for them.”

He told FMT the issue was not profitability but rather financial sustainability.

“We have never had a situation where both the price and traffic drops by such a substantial amount.”

He spoke of the need for a floor price, saying some countries have a stabilisation fund which Malaysia could emulate.

With such a fund, he said, there would be a floor price. If prices dropped below the floor price, the money saved by the government would be put into the fund.

If the price increases above the ceiling price, the money from the fund would be used to subsidise fuel.

Khairul voiced hope that after the MCO, the government would opt for monthly fuel price reviews, saying weekly reviews are too unpredictable.

He also suggested that the government limit the operating hours of petrol stations to 7am-7pm throughout the MCO.

“This would help reduce our costs. Electricity alone can cost a station between RM8,000 and RM15,000 a month. We could save a lot if we just operated for 12 hours.

“We also hope the government will insist that shops in petrol stations are closed to walk-ins and that all purchases are made through the cashier window only.”

He said even petrol pump attendants should not be made to work, to keep them safe from Covid-19.

At present, this is not a rule. Instead, station owners must follow the directives of oil companies.